[Opening Market] KOSPI Opens Down 3.17% Amid U.S. Tech Shock

On the morning of Oct. 19, the KOSPI and KOSDAQ indices are displayed on the electronic board at the dealing room of Hana Bank headquarters in Jung-gu, Seoul. (Yonhap) The domestic stock market started with a sharp decline on Oct. 19 due to the shock of weakness in United States tech and semiconductor stocks. The KOSPI, which succeeded in rebounding last Friday, turned downward in just one day, as concerns over the investment profitability of the artificial intelligence (AI) industry and uncertainties surrounding U.S. inflation and interest rates weighed heavily on investor sentiment. However, as low-end buying by foreign and institutional investors flowed in during early trading, the index’s decline showed some signs of narrowing. On this day, the previous trading day, the KOSPI rebounded by 113.83 points (2.05%) to close at 5,668.05, taking a breather for the first time in eight trading days, but a cold wind appears to be blowing again after just one day. In particular, vigilance is spreading across the market as the concentration on semiconductors overlaps with concerns about expanding memory semiconductor supply from China. According to the Korea Exchange opening market conditions at 9:00 a.m. on this day, the KOSPI started at 5,488.41, down 179.64 points (3.17%) from the previous trading day’s closing price. In an attempt to recover some of the losses at one point in early trading, the KOSPI reduced its decline to 5,594.27 as of 9:14 a.m., down 73.78 points (1.30%) from the previous trading day. As of 10:00 a.m., the KOSPI is engaging in a tug-of-war near 5,607.47, which is below the 5,600 level. The intraday high recorded 5,624.25 and the low reached 5,488.41, exposing extreme volatility. The KOSDAQ also began trading at 773.06, down 21.72 points (2.73%). With the anxiety that appeared during the sharp drop last week not fully resolved, both markets showed an unstable start as selling pressure concentrated around large-cap semiconductor stocks. At 9:14 a.m., it narrowed its decline to 0.33% at 792.18. However, investors’ vigilance remains high, given that it is difficult to judge a trend recovery based solely on the rebound movements in early trading. Foreign and Institutional Buying and Individual Selling… Focus on Supply and Demand Direction Foreigners, institutions, and individual investors are continuing a tense tug-of-war amid macroeconomic indicator uncertainties and the re-evaluation phase of the semiconductor industry conditions. Over the previous weekend, foreigners recorded net purchases in the spot market, breaking a selling streak that had continued for eight consecutive trading days, but as the directional divergence with the futures market was significant, they appeared to pivot back to risk management mode in early trading on this day. In the aftermath of the global tech shock, foreign investors are offloading selling volumes in the KOSPI Market, centering on large-cap IT and semiconductor stocks. Institutional investors are also joining in the selling by refraining from active betting ahead of concerns about the peak-out of the semiconductor industry and major economic events scheduled for this week (such as the Bank of Korea Monetary Policy Board meeting and U.S. big tech earnings announcements). In response, individual investors are using the sharp drop in the index as an opportunity for low-end buying, bringing in buying power to support the support line, but the center of gravity of supply and demand is completely tilted toward the selling dominance side. In the supply and demand by investment entities in early trading, the buying dominance of foreigners and institutions and the selling dominance of individuals were observed. As of 9:14 a.m., foreigners and institutions net purchased 623.27 billion won (about $479.44 million) and 436.24 billion won, respectively. Conversely, individuals net sold 976.79 billion won. In response to the sharp drop immediately after the opening, institutions and foreigners are engaging in low-end buying, while individual investors can be interpreted as placing weight on risk management and profit realization following the expanded volatility. The KOSDAQ market also took a direct hit from the weakness of global tech stocks, showing a simultaneous downward trend in step with the KOSPI. As of 9:04 a.m., foreigners and institutions net purchased 70.60 billion won and 10.70 billion won, respectively, while individuals net sold 82.20 billion won. At 9:40 a.m., foreigners and institutions are net purchasing 27.80 billion won and 15.20 billion won, respectively, and individuals are net selling 46.50 billion won. Samsung Electronics and SK Hynix Weak Together… Selling Spreads Across Large-Cap Stocks What is leading the market decline is undoubtedly the large-cap semiconductor stocks, the two major pillars of the domestic stock market. Along with doubts about the continuity of investments across the global AI value chain, aggressive supply expansion disclosures by competitors such as China’s CXMT were added, significantly shrinking investor sentiment. Samsung Electronics received strong selling pressure immediately after the opening, recording a sharp decline of around 5%, and as of 9:50 a.m., it fell by 500 won (0.23%) from the previous trading day to 215,000 won. As of 10:00 a.m., it is trading in the low-to-mid 200,000 won range, significantly lower than the previous trading day. It is surrendering a substantial portion of the previous gains, adding downward pressure on the index. SK hynix fell into the direct impact zone of concerns over slowing AI memory semiconductor demand and Chinese supply risks, showing a sharp plunge of over 6% in early trading to sink to the 1,180,000 won level. As of 9:50 a.m., it dropped by 35,000 won (2.75%) to 1,237,000 won. Core technology stocks, including Samsung Electro-Mechanics, a semiconductor materials, parts, and equipment stock, as well as Gigavis, simultaneously showed steep declines in the 8% to 9% range, freezing investor sentiment. On the other hand, amid the sluggishness of large-cap semiconductor stocks, some defensive stocks are attracting intraday low-end buying, but it is insufficient to change the overall direction of the index. As of 9:50 a.m., SK Square dropped by 24,000 won (3.06%) to 760,000 won, and HD Hyundai Heavy Industries fell by 15,500 won (4.41%) to 336,000 won. Samsung Electro-Mechanics declined by 69,000 won (5.81%) to 1,119,000 won, showing a relatively large drop among major large-cap stocks. Selling pressure continued across the overall market, with Samsung C&T also recording a decline in the 3% range. Conversely, some stocks showed an upward trend despite the weakness of the index. Samsung Biologics rose by 63,000 won (4.85%) from the previous trading day to 1,361,000 won. Samsung SDI also climbed by 28,000 won (5.28%) to 558,000 won. While selling poured out of semiconductors and some large-cap stocks, differentiated movements appeared by individual stocks. This trend shows that the market is not simply moving based on the overall direction of the index, but is collectively reflecting earnings forecasts by sector and the price burdens of individual stocks. In particular, as Samsung Electronics and SK hynix account for a large proportion of the domestic stock market, if the downward trend of the two stocks continues, it could pose a burden on the KOSPI’s recovery speed. In the KOSDAQ market, the difference in fluctuations among top market capitalization stocks was prominent. As of 9:50 a.m., Alteogen fell by 2,000 won (0.85%) from the previous trading day to 232,000 won. Ecopro rose by 2,900 won (3.57%) to 84,200 won, and Ecopro BM climbed by 3,200 won (2.99%) to 110,100 won. In contrast, weakness continued in semiconductor-related stocks. Fadu fell by 5,400 won (9.44%) to 51,800 won, and EO Technics dropped by 26,500 won (5.92%) to 421,500 won. Jusung Engineering declined by 9,500 won (4.51%) to 201,000 won, and Leeno Industrial also fell by 3,500 won (4.94%) to 67,300 won. This suggests that while the shock of the US tech stock weakness is spreading not only to domestic large-cap semiconductor stocks but also to related equipment and parts stocks, low-end buying is flowing into secondary batteries and some bio stocks. The main backgrounds for this decline are cited as the weakness of U.S. tech stocks and concerns over investments in the AI industry. According to a Newspim report, on Oct. 16 in the New York stock market, the NASDAQ Composite Index fell by 2.14%, and the Philadelphia Semiconductor Index dropped by 3.83%. The Philadelphia Semiconductor Index fell for eight consecutive trading days, recording its longest continuous downward streak since the 2008 global financial crisis. The market is paying attention to how quickly AI-related companies can convert the funds invested in large-scale data centers and semiconductor infrastructure into actual profits. Analysis indicates that overall investor sentiment in the semiconductor sector has shrunk as the debt burdens and financing concerns of AI infrastructure companies have been highlighted, compounded by the possibility of technological pursuit by Chinese memory companies. The rise in international oil prices is also a burden. On this day, December Brent crude rose by 3.7% to $109.86 per barrel, and November West Texas Intermediate (WTI) climbed by 3.5% to $101.41 per barrel. Rising oil prices can act negatively on the stock market in that they increase inflationary pressure and could weaken expectations for US interest rate cuts. Won-Dollar Exchange Rate Starts in 1,335 Won Range In the foreign exchange market as well, global risk aversion sentiment has emerged as a major variable. In the foreign exchange market on this day, the won-dollar exchange rate seemed to stabilize as it renewed its annual low at 1,331.4 won on the previous trading day, but it started at 1,335.1 won as of 9:00 a.m., exploring its direction amid global stock market instability and minute movements in the dollar. The market’s gaze is now turning to internal and external events, such as the Bank of Korea Monetary Policy Board’s interest rate decision scheduled for Oct. 22 and the International Monetary Fund (IMF) annual consultation scheduled for in early November. Currently, in the bond market, the yield on three-year government bonds is testing its support level in the 3.85% range, and the forecast for a freeze of the Bank of Korea base rate at 3.00% is dominant. Depending on whether the earnings of U.S. big tech companies announced this week prove the continuity of actual AI investments, it is predicted that the stabilization of further declines in the domestic stock market will be determined. The domestic stock market in the morning session recovered some of its losses after a sharp opening drop, but the uncertainty surrounding the market remains high. In the KOSPI, while the net buying trend of foreigners and institutions is supporting the lower end of the index, the weakness of core semiconductor stocks such as Samsung Electronics and SK Hynix is limiting the rebound. In the KOSDAQ, some secondary battery stocks rose, but downward pressure continued, centered on semiconductor equipment stocks. Stock market experts generally see three variables that will determine the future direction of the market. First, whether the buying trend of foreigners and institutions will continue rather than stopping in early trading. Second, whether the overall investor sentiment in the semiconductor sector will recover as the decline of Samsung Electronics and SK hynix narrows. Third, whether the earnings and AI investment plans of U.S. tech companies can alleviate the market’s profitability concerns. In particular, it is too early to judge that the bottom has been confirmed solely by the narrowing of the index’s decline in the morning session. The continuity of foreign supply and demand, the price recovery of semiconductor stocks, and the stability of the won-dollar exchange rate must be confirmed together. Market participants need to prepare for expanded volatility while distinguishing between a technical rebound after a sharp drop and a trend recovery.